The Power Combo: Setting Up a Dubai Company with a UK LLP
Table of Contents
Introduction
Hey there! Let’s talk about something a bit off the beaten path that more people should be aware of: setting up a Dubai company and pairing it with a UK LLP (Limited Liability Partnership). You’ve probably heard of people doing something similar with a US LLC – setting up a company in Dubai, establishing a US LLC for transactions, and moving funds back to Dubai.
But what about using a UK LLP instead? This option, while less popular, can offer some serious benefits for the right people, and in some cases, it might even be a better choice than the US LLC.
Today, We’re breaking down everything you need to know about setting up a UK LLP alongside your Dubai company. So, let’s get into the nitty-gritty of how this can work and why it might just be the strategy you’ve been looking for!
Here’s a video on the same topic by our co-founder, Kevin McKenzie.
What is a UK LLP and How Does it Work?
First off, let’s get the basics out of the way: what exactly is a UK LLP? LLP stands for Limited Liability Partnership. The key thing to note here is that you cannot set up a UK LLP on your own; it requires at least two partners. These can be either individuals or entities.
So, if you’ve already set up a company in Dubai, you could structure it so that your Dubai company is one partner, and you as an individual are the other partner in the UK LLP. Pretty simple, right? It’s important to note that there are no residency requirements, meaning you can do all of this without ever setting foot in the UK. It’s similar to how you can open a US LLC without being a US resident.
Why Consider the UK LLP?
You might be asking yourself, “Why would I want to set up a UK LLP instead of just sticking to my Dubai company?” Well, there are a couple of key reasons this could be a smart move for you, depending on your business needs.
Global Credibility:
Having a UK company immediately boosts your global credibility. Let’s face it, the UK is one of the most highly respected countries in the business world. When you have a UK company, people view you and your business in a more professional and trustworthy light. If you’re working with international clients, having a UK LLP can make a huge difference in how they perceive you. It shows that you’re not just a one-man operation out of some obscure location – you’re serious about your business, and you’ve got a legitimate presence in one of the world’s top financial markets.
Access to UK Banking and Payment Processors:
Another huge perk of having a UK LLP is the access you gain to banking and payment processors in the UK. You can open bank accounts in a different jurisdiction, giving you more flexibility and options. Even more importantly, you’ll have access to popular payment processors like Stripe, Wise, and Revolut – services that might not be available with your Dubai company alone. If you’re doing business internationally, having access to these platforms can make a big difference in how efficiently you can operate and how much you end up paying in fees.
The LLP as a Pass-Through Entity
Here’s where things get interesting. A UK LLP is a pass-through entity, meaning that the LLP itself does not pay taxes. Instead, any income generated by the LLP gets “passed through” to the owners, and they pay taxes on that income personally. Now, if you’re a resident of Dubai, this is where it gets good: Dubai has 0% personal income tax. So, in theory, if you’re living in Dubai and owning a UK LLP, that income gets passed through to you and is taxed… well, not at all! Pretty great, right?
But, before you get too excited, there are some important considerations to keep in mind.
Permanent Establishment
When you have a UK LLP and you’re operating it out of Dubai, you have to be aware of something called permanent establishment. In simple terms, this means that even though you’ve got this UK LLP, if you’re running everything from Dubai, it’s essentially considered a Dubai company. You can’t just set up a UK LLP and pretend that it has nothing to do with Dubai.
If the management, decision-making, and operations are all happening in Dubai, then Dubai’s tax laws are going to apply to your business – which means the company might be subject to corporate tax in Dubai. This isn’t the end of the world, though, because Dubai’s corporate tax only kicks in when you’re making over AED 375,000 (around $817,000). And even then, there are various reliefs and exemptions available that can reduce your tax liability.
The Corporate Tax Angle
In Dubai, corporate tax is only something you need to worry about if you’re generating significant revenue. If your revenue is below the AED 375,000 threshold, you’re in the clear and won’t have to pay corporate taxes. If you’re making more than that, you’ll be subject to Dubai’s corporate tax rate of 9%, but there are ways to minimize the impact, especially with small business reliefs.
For instance, if you and a partner own the UK LLP and you’re both residents of Dubai, the income that the UK LLP generates is still going to be considered Dubai income because of that permanent establishment rule. But remember, corporate tax only comes into play if you’re making serious money. So, depending on the structure of your business and how much you’re making, this might not even be something you need to worry about.
Real-Life Example: How It Could Work
Let’s break this down with an example. Say you open up a UK LLP called GenZone UK LLP. You own 20% of it, and your business partner owns 80%. You both live in Dubai, so you’re both paying 0% income tax on your personal earnings. However, because of the permanent establishment rule, the income that the UK LLP generates is considered to have been made in Dubai. In this case, both of you would be liable for corporate taxes in Dubai based on your ownership stakes.
Now, let’s say your business partner doesn’t live in Dubai – maybe they live in Germany. In that case, their 80% share of the LLP’s income would be taxed according to Germany’s tax laws, while your 20% would still be taxed in Dubai (at 0%, of course). So, as you can see, the tax situation can get a little tricky depending on where everyone involved in the LLP is based, but if you plan it right, it can still be a very effective strategy.
The Benefits of a UK LLP: More than Just Taxes
So, why would someone go through the trouble of setting up a UK LLP if they’re just going to be taxed on the income anyway? Well, like I mentioned earlier, there are several non-tax benefits that make this a smart move.
1. Credibility:
Having a UK company immediately boosts your reputation in the eyes of international clients. This is especially valuable if you’re doing business in markets like Europe or North America, where the UK is seen as a stable and highly respected jurisdiction.
2. Banking and Payment Processing Options:
By setting up a UK LLP, you’ll gain access to UK banking institutions, which can offer a whole new level of financial services and flexibility. You’ll also be able to use popular payment processors like Stripe, Wise, and Revolut, which can make it easier to accept payments from international clients and avoid unnecessary fees.
3. Avoiding Forex Fees:
Let’s say you’ve got a client in the UK who wants to pay you in GBP (British Pounds). If your company is based in Dubai and you’re accepting payments in AED (or even USD), you’re going to get hit with currency conversion fees every time you accept a payment. But, if you’ve got a UK LLP, you can accept GBP payments directly, and avoid those costly Forex fees altogether. This can save you a significant amount of money over time.
4. Diversifying Your Corporate Structure:
Having a presence in multiple countries can also help you diversify your business operations. If one jurisdiction tightens its regulations, you’ve still got the other one as a backup. Diversification is not just for your investment portfolio; it can be a smart strategy for your business structure as well.
How GenZone Can Help You Set Up Your Dubai-UK LLP Combo?
Here at GenZone, we specialize in helping entrepreneurs like you set up their businesses in Dubai, get their Dubai residency, open Dubai bank accounts, and pair it with a UK LLP to take advantage of everything we’ve talked about today.
We’ve helped countless clients set up this kind of structure and navigate the legal, tax, and operational challenges that come with it. If you’re not sure if the UK LLP is right for you, or if you’re curious about how it stacks up against the US LLC, feel free to reach out!
Book a call using the link below, and we’ll walk you through every step of the process.
